Understanding Labor Law in Madeira: Wages, Contracts, Working Hours, and Remote Work

Published on April 24, 2026 and written by Cyril Jarnias

Labor law in Madeira is based on the same foundation as in the rest of the country: the Portuguese Labor Code (Law 7/2009), supplemented by regional decrees where the Constitution allows, particularly for the minimum wage. However, the autonomous region stands out due to several important specificities, especially regarding minimum pay, collective bargaining practices, and family social protection.

A National Legal Framework Applied at the Regional Level

The essential starting point, including for companies based in the Madeira International Business Centre (MIBC/IBC), is the Portuguese Labor Code. This document defines the employment relationship as a contract whereby an individual provides an activity to a company, in exchange for remuneration, under the authority and direction of the employer. All rules regarding contract formation, execution (working time, leave, health and safety, non‑discrimination), and termination (dismissal, severance pay, notice periods) are established in this Code.

The region may, however, within the constitutional framework, improve certain guarantees. This is the case for the regional minimum wage, set by legislative decree of the Legislative Assembly of the Autonomous Region, and higher than the national minimum.

Employment Contracts in Madeira: Forms, Duration, and Probationary Period

Portuguese law recognizes several types of contracts, applicable as they are in Madeira. The open-ended contract (permanent contract) constitutes the “normal” form of employment. Fixed-term contracts are strictly regulated and require a legal reason.

Main Types of Contracts

The main distinctions are:

– Open-ended contract (permanent contract);

– Fixed-term contract (definite term);

– Open-ended contract tied to an event (uncertain term);

– Part-time contracts, temporary agency work, or telework, which are subject to specific written form requirements.

Term contracts can include:

– A definite term, with an end date set in advance;

– An uncertain term, linked, for example, to the completion of a project or the cessation of the reason that justified the hiring.

Maximum Duration of Temporary Contracts

The law imposes duration limits, including renewals. This can be summarized as follows:

If a temporary contract continues for more than 10 days after the term expires without the employer’s reaction, the relationship is also presumed to become open-ended.

Probationary Period

All contracts may include a probationary period, unless expressly excluded. It allows both parties to terminate the contract without cause or severance pay, subject to respecting a minimum notice period when the probationary period is long.

The maximum durations are as follows:

When the probationary period exceeds 60 or 120 days, the employer must respect a minimum notice period of 7 or 15 days in case of termination at its initiative, or pay equivalent compensation.

Working Time, Overtime, and Scheduling

The Labor Code sets, for Madeira as for the mainland, a legal ceiling of 8 hours per day and 40 hours per week for normal working time, both day and night. These limits may, however, be adjusted by collective bargaining or by agreements provided for by law.

“Standard” Working Time Organization

In practice, many Madeiran companies apply a “administrative” schedule with a long lunch break, for example:

The employer must display the schedule chart visibly. Any work beyond these limits constitutes overtime, subject to surcharges and annual caps.

Overtime: Rules and Compensation

In principle, recourse to overtime is reserved for exceptional situations: temporary increase in activity, force majeure, prevention or repair of serious damage to the company. The employee is generally required to perform these hours, unless there is a valid reason, but retains the right to refuse in case of abuse.

The main rules are as follows:

The compensation for overtime depends on when it is performed and the volume already completed in the year. The most common scheme is as follows:

Overtime can also be compensated, in whole or in part, by equivalent rest days, if the collective agreement or company agreement provides for it.

Certain categories are protected: pregnant women, breastfeeding mothers, and parents of children under 12 months cannot be forced to work overtime.

Flexibility Schemes: Adaptability and “Hour Bank”

The law allows for the adaptation of working time through various mechanisms, often negotiated at the level of collective agreements:

An individual agreement may also allow concentrating work over 4 days per week, extending the day up to 12 hours, subject to daily and weekly rest limits.

In all cases, the law requires:

– a minimum daily rest of 11 consecutive hours between two working days;

– a break after 5 consecutive hours of work, lasting at least 30 minutes for days longer than 6 hours;

– at least one day of weekly rest, usually Sunday, which may be moved in certain sectors.

Paid Leave, Public Holidays, and Vacations in Madeira

The right to annual paid leave is particularly protected: it cannot be replaced by a simple allowance, except at the end of the contract. In Madeira, national rules apply, with some specificities related to local public holidays.

Annual Leave

Each employee is entitled to 22 working days of paid leave per year. For the first year of hiring, accrual occurs at the rate of:

– 2 working days of leave per full month of contract, up to a maximum of 20 days;

– actual taking of leave is only possible after 6 full months of service.

In case of contract termination, the employee is entitled to:

– compensation for unused leave days, including for the year of termination;

– proportional payment of the vacation bonus.

National and Regional Public Holidays

Portugal has 12 mandatory national public holidays. In addition, Madeira has two mandatory regional public holidays and municipal holidays.

Among the specific holidays mentioned for the region are:

These dates add to national holidays such as Portugal Day, Republic Day, Christmas, etc. Three “optional” public holidays may also be observed depending on local custom or collective agreement.

Work on a public holiday is compensated with a surcharge of at least 150% or compensated by equivalent rest, according to overtime rules.

Remuneration in Madeira: Minimum Wage, 13th and 14th Months, Social Charges

Remuneration in Portugal is structured around a monthly base salary, supplemented by two mandatory “extra” months: the vacation bonus and the Christmas bonus. Madeira adds to this framework a higher regional minimum wage than on the mainland.

Minimum Wage: A Regional Advantage

The minimum wage is a central element of Madeiran social policy. It is defined as a guaranteed monthly gross amount, before deductions for social security contributions (11% borne by the employee) and income tax (IRS). It applies to all employers, even when collective agreements or individual contracts provide for a lower amount.

The recent evolution of the minimum wage in Madeira can be summarized as follows: the minimum wage has seen significant increases in recent years, reflecting a desire to support workers and adapt to the rising cost of living in the region. These adjustments aim to improve citizens’ living standards and reduce economic disparities.

In 2026, paid over 14 monthly installments, this minimum is equivalent to approximately €940 per month. Regional authorities have announced a target of reaching €1,200 as the regional minimum by 2029, with projected milestones of €1,050 in 2027, €1,130 in 2028, and €1,213 in 2029. Since 2015, the cumulative increase in the minimum wage in Madeira exceeds 78%, i.e., about €400 more per month.

Salary and Mandatory Supplements

Beyond the minimum, remuneration in Portugal, including Madeira, follows a 14-payment annual scheme:

– 12 ordinary monthly payments;

– 1 vacation bonus equivalent to one month’s base salary, paid before taking leave;

– 1 Christmas bonus equivalent to one month’s base salary, paid before December 15.

These two bonuses cannot be used to artificially “inflate” the base salary to claim compliance with the legal minimum. The monthly base salary itself must at least reach the applicable regional minimum.

Social Security Contributions and Taxation

The social security system imposes a total contribution of 34.75% of gross salary, distributed as follows:

– 23.75% borne by the employer;

– 11% borne by the employee.

The employer is required to: comply with legal and contractual obligations towards its employees.

– register its employees with Social Security (obtaining a NISS number);

– declare and pay contributions between the 10th and 20th of the following month;

– withhold income tax (IRS) at source, according to a progressive rate table based on income level and family situation.

Non-payment of the minimum wage, or failure to pay social security contributions, constitutes a very serious offense, punishable by the ACT with fines that can reach several tens of thousands of euros for large companies, and exposes managers to personal liability.

Health, Safety, and Working Conditions

The right to safe and healthy working conditions is strongly protected in Portugal. In Madeira, the Authority for Working Conditions (ACT) oversees the application of standards, while national legislation details prevention, training, and medical monitoring obligations.

General Prevention Principles

Employers must apply the general principles of prevention: avoid risks, evaluate those that cannot be avoided, combat risks at source, adapt work to the individual, inform and train employees. Concretely, they are required to:

Companies must also have first aid resources, fire detection systems, and procedures for situations of serious and imminent danger, particularly in high-risk sectors (construction, industry, mining, fishing, etc.).

Role of the ACT and Procedures in Case of Accident

The ACT can be contacted by any employee in case of alleged non-compliance, via a complaint, including online. In the event of a serious or fatal workplace accident, the employer must notify the ACT within 24 hours. In the construction sector, if the employer fails to do so, the executing company, or even the project owner, has a subsidiary obligation to report.

Telework and the “Right to Disconnect”: A Rapidly Evolving Area

Portugal has profoundly modernized its telework regime with Law 83/2021, which came into effect in 2022. These rules apply fully to Madeira.

Definition and Written Agreement

Telework is defined as an activity performed under the legal subordination of the employer, but outside its premises, using information and communication technologies. This definition covers:

– 100% telework;

– hybrid arrangements combining on-site and remote work.

A written agreement is mandatory, either included in the initial contract or as an addendum. This agreement must specify:

– the remote work location (address), legally considered the place of work;

– the duration of the agreement (fixed or indefinite) and renewal or termination conditions;

– daily and weekly working hours;

– job category, remuneration, and mention of the telework regime;

– ownership and characteristics of equipment, as well as responsibility for its installation, maintenance, and repair;

– arrangements for covering additional costs (electricity, internet, equipment, etc.);

– frequency of in-person contact to limit isolation.

Right to Request or Refuse Telework

An employer cannot unilaterally impose telework on an employee. Conversely, the employee may refuse a telework proposal without having to justify it and without risk of sanction.

However, certain employees have a right to telework, provided their position is compatible and the company has the necessary technical means. Those concerned include:

– parents of a child up to 3 years old;

– parents of a disabled child, a child with a chronic illness, or cancer, regardless of age, if the child lives at home;

– parents of a child up to 8 years old, in certain situations (single-parent family, when only one parent can telework, or if both share telework over a 12-month reference period);

– victims of domestic violence who have filed a complaint and left the family home;

– non-primary informal caregivers recognized by Social Security, for up to 4 years.

Equipment, Costs, and Taxation

The employer must provide the necessary equipment (computer, software, communication systems) or validate the characteristics and cost of equipment belonging to the employee, while bearing their maintenance and repair costs.

Additional expenses related to telework must be reimbursed. This can be done in the form of:

– a monthly flat-rate allowance provided for in the contract or collective agreement;

– reimbursement upon proof of expenditure, covering notably the difference in electricity and internet consumption compared to the reference month before telework.

A ministerial order sets daily amounts exempt from IRS and social security contributions, for example:

Beyond these amounts, reimbursements are generally considered taxable income.

Health, Safety, and Remote Monitoring

Teleworkers enjoy the same health and safety at work rights as on-site employees. The employer must:

The employer may visit the telework location only to verify safety conditions or equipment, within a restricted time window (between 9 a.m. and 7 p.m.), with at least 24 hours’ notice and the employee’s consent, in the presence of the employee or a person of their choice.

Right to Disconnect and Protection of Privacy

The law introduced a genuine right to disconnect: the employer is obliged to refrain from contacting the employee outside working hours, particularly during daily rest periods, rest days, and vacation, except in cases of force majeure or proven emergency. Violations can be penalized with fines.

Privacy protection is also strengthened. It is prohibited to use intrusive surveillance devices to monitor employee performance, such as:

– continuous tracking of time spent on each application;

– automatic screen capture;

– requiring the camera to remain on at all times;

– unjustified real-time geolocation.

Any surveillance methods potentially used must be proportionate, reported to the National Data Protection Commission (CNPD) when they involve processing sensitive data, and brought to the attention of employees, indicating their purposes (protection of persons and property, specific requirements of certain activities).

Parental Leave and Family Rights: A Protective Regime, with a Bonus in Madeira

The Portuguese parental leave system, applicable in Madeira, has evolved significantly since 2009, with a logic of sharing responsibilities between parents and incentives for fathers’ involvement.

Initial Parental Leave and Specific Mother/Father Leave

The initial parental leave lasts 120 or 150 calendar days, depending on the parents’ choice and the desired remuneration level. It can be shared between the two, with a bonus if the sharing is effective.

– The mother must take 42 days (6 weeks) after childbirth, which can be advanced by up to 30 days before delivery.

– The father has a reserved leave (Fathers‑only Parental leave), now 28 mandatory days plus 7 optional days, paid at 100%, to be taken within 42 days after birth, including 7 consecutive days immediately after birth.

– 150 days at 100% of the reference salary; or

– 180 days at 83% of the reference salary, in case of sharing meeting the criteria.

Parents residing in Madeira benefit from a 2% increase in parental leave benefits, to compensate for the cost of insularity.

Extensions and Special Cases

Extensions are provided:

– 30 additional days per child in case of multiple births (twins, triplets, etc.);

– extension in case of child hospitalization or prematurity (up to 33 weeks of gestation or need for special care);

– specific leave for parents of children with cancer, disability, or chronic illness, with extended leave rights (at least 6 months).

Parents undergoing medically assisted reproduction (MAR/IVF) treatment can also be absent for up to three days per treatment cycle.

Complementary Parental Leave and Part-Time Work

After the initial parental leave, each parent is entitled to complementary parental leave of three months, which can be taken:

– full-time, compensated at 25% of the reference salary if taken immediately after the initial leave;

– part-time, working half-time, with a proportional benefit (generally 20 to 30% of the reference salary);

– in a staggered manner (days or half-days).

This additional leave can be used until the child’s 6th birthday. Madeiran parents again receive a 2% increase in the benefit.

Additional rights exist for parents of children up to 12 years old (or without age limit in case of disability or chronic condition) regarding flexible hours, telework, and refusal of overtime.

Termination of Employment Contract: Grounds, Procedures, and Severance Pay

Portuguese law does not allow “at‑will” termination: the end of a contract always requires a legal ground and compliance with strict procedures. In Madeira, this regime applies fully.

Modes of Termination

The main modes of termination are:

– expiration of a fixed-term or open-ended contract (uncertain term);

– termination by mutual agreement, in writing, with a 7-day withdrawal period for the employee (unless notarized signature);

– disciplinary dismissal for serious fault attributable to the employee;

– collective dismissal, for economic, structural, or technological reasons;

– dismissal due to job elimination;

– dismissal for inadequacy / unsuitability for the position;

– contract resolution by the employee for just cause (employer’s fault);

– employee resignation with notice;

– absolute and definitive impossibility of providing or receiving work (disability, company dissolution, etc.);

– employee retirement.

Dismissal at the Employer’s Initiative

For a permanent contract, the employer may only terminate in case of serious fault or objective grounds. Serious fault must make the continuation of the contract immediately and practically impossible. Specifically mentioned are:

To be valid, disciplinary dismissal must follow a contradictory procedure regulated by the Labor Code. Failure to follow this procedure renders the dismissal illegal, entitling the employee to compensation, payment of back wages, and the choice between reinstatement and compensation set by the court.

The ACT participates in the procedure in these cases and verifies the compliance of grounds and selection criteria for affected employees.

Termination at the Employee’s Initiative

The employee may:

– terminate for just cause, without notice, when serious employer behavior makes continuing the relationship intolerable (non-payment of wages, harm to safety and health, harassment, serious harm to dignity, substantial and lasting change in working conditions, etc.);

– resign without cause by respecting a written notice period:

– 30 days for tenure up to 2 years;

– 60 days beyond.

He/she must act within 30 days of becoming aware of the facts justifying the termination due to employer fault.

Severance Pay and Exit Entitlements

Compensation rules have been reformed several times. For recent contracts, the main points are:

The employee is also entitled to:

– payment of wages due;

– compensation for unused leave and proportional bonuses (vacation and Christmas);

– a work certificate stating start and end dates and job functions performed;

– documents necessary for unemployment registration.

If a dismissal is deemed unlawful by the court, the employee may obtain, in addition to back pay, damages for moral and material harm, and choose between reinstatement and compensation set by the court.

Certain categories benefit from enhanced protection, notably pregnant women, postpartum or breastfeeding mothers: any dismissal concerning them requires prior opinion from the Commission for Equality in Labour and Employment, under penalty of nullity and heavy sanctions.

Collective Bargaining and Regional Specificities

Madeira is fully part of the Portuguese collective bargaining system, historically centered on sectoral agreements. Over 80% of covered employees are covered by a sectoral agreement, often extended to all companies in the sector through extension orders published in the Boletim do Trabalho e Emprego (BTE) of the Ministry of Labour.

Collective regulation instruments include:

In Madeira, as elsewhere, an extension order cannot include clauses contrary to mandatory provisions of the Labor Code, particularly regarding regional minimum wage, maximum working time, health and safety, or parental leave.

The economic crisis of the 2010s, followed by the conditions imposed by the “Troika”, caused a collapse in the renewal of collective agreements, with a renewal rate falling to 11% of coverage in 2013‑2014. Since 2015, the situation has gradually recovered, with an increase in the number of agreements, including on topics of equality, non‑discrimination, and parental protection.

Conclusion: A Protective Framework, but Demanding in Terms of Compliance

Labor law in Madeira combines the rigor of the Portuguese framework with some strong regional specificities, foremost among which the minimum wage, higher than on the mainland, and the increase in parental benefits. For employers, whether local or foreign, the priority is to comply with:

For employees, knowing these rights allows better contract negotiation, contesting irregular situations before the ACT or the labour court, and fully benefiting from the protections provided, whether regarding wages, working time, parenthood, or safety at work. In a context where the region pursues a proactive policy of raising low wages and supporting employment, a thorough understanding of labour law in Madeira becomes an essential tool, both for securing economic activities and guaranteeing the dignity and quality of life of workers.

Cyril Jarnias

Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.

On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.

Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.

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